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[2020] ZAECPEHC 10
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AR v HR (3565/2018) [2020] ZAECPEHC 10 (19 May 2020)
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IN
THE HIGH COURT OF SOUTH AFRICA
EASTERN
CAPE LOCAL DIVISION – PORT ELIZABETH
Case
No: 3565/2018
Reportable
In
the matter between:
A[…]
E[…] R[…]
Applicant
and
H[…]
W[….] E[….] R[….]
Respondent
JUDGMENT
MAKAULA
J:
A.
Introduction
:
[1]
This is an application for the final sequestration of the estate of
the respondent
by the applicant who is his ex-wife. The
provisional application was granted by Mullins AJ in his judgment
dated 22 October
2019. The provisional application was opposed
as is the final application before me. The grounds of
opposition have
not changed apart from the fact that the respondent
insisted that the money in the Trust account should be accounted for,
utilised
to set off his maintenance debt and that he shall lay
criminal charges for the misappropriation of those funds.
B.
Background
:
[2]
The parties were married to each other and were blessed with two
children who were
aged three and five at the time of divorce which
was granted on 18 May 2010. Incorporated in the decree of
divorce was a
settlement agreement the relevant terms of which were
that the respondent agreed to contribute towards the maintenance of
the children
in the amount of R3000.00 per month per child. The
applicant avers that the respondent did not comply with the order.
At the time of the inception of the application, the respondent was
in arrears in the amount of R360 000.00. Judgment
was
obtained in the aforementioned amount. Before a writ of
execution (writ) was executed, attempts were made to trace the
whereabouts of the respondent to no avail. The writ could not
be executed because the respondent could not be found by the
Sheriff. Substituted service had to be resorted to in order to
serve the papers.
[3]
The respondent opposes the application on the basis that he could not
fulfil his maintenance
obligations because he has been unemployed
since October 2012 and has no source of income. The defence
raised by the respondent
has been succinctly dealt with by Mullins AJ
as follows:
“
5
The respondent makes an attempt to raise defences to the
application. He
alleges that during 2014 the applicant received
R250, 000.00 from a trust, of which trust the children are the
beneficiaries,
and therefore this amount should be set off against
his maintenance of obligation. He also claims that during 2010
the applicant
misappropriated R3, 500,000.00 from his former
company, Renken Game (Pty) Ltd. This should also be taken into
account.
Finally, he submits that he has applied for a
discharge of the maintenance obligation in the Maintenance Court”.
[4]
I do not propose to deal with the issue raised in the oral argument
before Mullins AJ about failure
to file a Masters Certificate
evidencing that security for costs had been filed. This issue
was also raised before me.
I need not deal with it because it
was pertinently dealt with in the judgment by Mullins AJ.
[5]
Having considered the facts and the requirements for the granting of
the provisional
sequestration, Mullins AJ, correctly in my view,
granted the provisional order.
[6]
The respondent, before me argued, that the applicant has other
avenues that she could
pursue to get the arrear maintenance payment
other than the present application. Reliance was placed in the
matter of
South African Revenue Services
v Sello Julius Malema
in reported Case
No 76306/2015: Gauteng Division: Pretoria, a copy was attached.
With respect I cannot see the relevance of
this judgment because it
concerns an application for Leave to Appeal an order made by a Judge
who had since resigned. It
was heard before Makgoka J, who did
not deal with the merits of that case in granting the appellant leave
to appeal. It has
nothing to do with the merits nor the
principles of law before me.
[7]
The issue of the money invested in the Trust on behalf of the
children was also dealt
with succinctly by Mullins AJ when granting
the provisional order. It would be futile for me to revisit
that issue.
I agree with his reasoning in this regard.
C.
Analysis
:
Section
12 of the Insolvency Act,
[1]
(the Act) states that.
[8]
In order for a final sequestration order to be granted the court must
be satisfied
that:
8.1
the sequestrating creditor has established against the debtor a claim
of not less than R100.00
entitling him or her to apply for the
sequestration of the debtor’s estate;
8.2
that either the debtor has committed an act of insolvency or the
debtor is insolvent; and
8.3
there is reason to believe that it will be to the
advantage of creditors if the debtor’s estate
be
sequestrated
[2]
.
[9]
It is common cause that the onus lies with the applicant to satisfy
these requirements
[3]
. The
respondent owes the applicant an amount (to date) in excess of
R360 000.00 in arrear maintenance. What is
of further
importance in this regards is that the judgment is not and has never
been challenged by the respondent. The judgment
therefore
stands. In this regard Roper J
[4]
expressed himself as follows:
“
The
ordinary rule, however, is that the judgment stands and must be
recognised as valid until it is set aside by the Court . . .
. I am
obliged, therefore to regard the judgment debt as a valid one and the
Applicant as having a valid claim as a judgment creditor
. . . .”
The
respondent does not dispute this fact. It has further not been
gainsaid that the respondent is factually insolvent.
He has no
assets. He is not employable because of his age, standard of
education and lack of skills as he states in his papers.
[10]
An act of insolvency is a statutory concept which obviates the
necessity of providing actual
insolvency
[5]
.
The reason behind this is that section 8 of the Act stipulates the
acts which the debtor has to commit in order to be declared
insolvent. Section 8(a) reads:
“
8
Acts of Insolvency. – A debtor commits an act of insolvency -
(a)
if he leaves the Republic or being out of the Republic remains absent
therefrom, or
departs from his dwelling or otherwise absents himself,
with intent by so doing to evade or delay the payment of his debts”.
[11]
The applicant makes the point in the founding affidavit that the
respondent was advised on 22
August 2011 per letter addressed to his
erstwhile attorney that he was owing an amount of R30 940.22 as
at that time.
Further correspondence was exchanged until March
2013, whereafter the respondent unbeknown to the applicant and the
children sold
all his assets. The applicant states that an
attempt was made to execute a writ of execution against the property
of the
respondent but he was not found at the given address.
Tracing agents were employed to trace the respondent and a CIPC
search
was conducted to no avail. The means employed by the
applicant’s attorneys to locate the respondent for purposes of
service, are spelt out in the application for substituted service.
The respondent’s denial that he never evaded service
of the
papers and was not in hiding is unsubstantiated. He avers that
the applicant knew his phone number and if he had been
telephoned, he
would have told them his address. The applicant has annexed a
report from tracing agents who phoned the respondent
to no avail.
The report dated 22 January 2018 reflects in part:
“
R[…]
is hiding and we could not establish where his address is at a
specific time. R[…] moves around at this
moment between
Ellisras, Limpopo and 42139 K[…], K[…], Eastern Cape.
(This address is the address for his parents).
It will be
almost impossible to find R[…] at any of these addresses
because they shield him these addresses.
(Sic)
We made three calls to
R[…] during the time of the trace and his is always making
excuses which is an indication of his hiding”.
(
Sic)
National Tracing and
Verification Services also on 12 June 2018 reported thus:
“
Please
note that we have satisfied all our resources and leads herein, and
we have no alternative but, to render a no-trace report
herein”.
[12]
The Sheriff for Kirkwood 04/04/2019 served the Notice of motion by
affixing a copy on the address
noting that:
“
No
other manner of service possible after diligent search and
enquiries”.
[13]
A similar return of service by the Sheriff of Kirkwood dated
08/04/2019 was filed reflecting
‘no trace of the respondent’.
It is apparent from the attempts made that the respondent was
avoiding to be known
where he was. It is only after the Notice
of Motion in this matter was served that the respondent appeared, so
to speak,
by filing a Notice to oppose on 6 May 2019. I am
satisfied that the requirements of section 8(a) of the Act were met
by the
applicant.
[14]
Section 8(c) reads that a debtor commits an act of insolvency:
“
If
he makes or attempts to make any disposition of any or his property
which has or would have the effect of prejudicing his creditors
or of
preferring one creditor above another”.
[15]
The respondent, as aforesaid, does not dispute his indebtedness to
the applicant. By his
own admission, for reasons dealt with
above, he could not and is unable to fulfil his obligation of paying
maintenance for his
children. The respondent in his answering
affidavit makes startling admissions in regard to the sale of all his
property.
The respondent states that he was unemployed as from
October 2012 and could not pay maintenance.
He
states as follows:
“
I
admit I sold my belongings, but the monies were paid into the H[…]
R[…] Familie Trust. The applicant
has been
accessing the monies over the years, unlawfully for whatever reason.
. . . Approximately 5 years after our divorce, I
sold all my assets
and put the monies in the H[…] R[…] Familie Trust”.
[16]
Referring to such a situation, Innes CJ
[6]
expressed himself as follows:
“
Now,
when a man commits an act of insolvency he must expect his estate to
be sequestrated. The matter is not sprung upon him
. . . . Of
course; the Court has a large discretion in regard to making the rule
absolute; and in exercising that discretion the
condition of a man’s
assets and his general financial position will be important elements
to be considered. Speaking
for myself, I always look with great
suspicion upon, and examine very narrowly, the position of a debtor
who says, ‘I am
sorry that I cannot pay my creditor, but my
assets far exceed my liabilities.’ To my mind the best’
proof of
solvency is that a man should pay his debts; and therefore I
always examine in a critical spirit the case of a man who does not
pay what he owes”.
[17]
If it can be established that the
facto
probanda
exist
the court has no option but to grant the order. This much was
expressed in
Firstrand
Bank v Evans
[7]
where Wallis J said:
“
1)
Once the applicant for provisional sequestration has established on a
prima facie basis the requisites for such an order, the
court has a
discretion whether to grant the order. There is little
authority on how this discretion should be exercised,
which perhaps
indicates that it is unusual for a court to exercise it in favour of
the debtor. Broadly speaking, it seems
to me that the
discretion falls within a class of cases generally described as
involving a power combined with a duty. In
other words, where
the conditions prescribed for the grant of a provisional order of
sequestration are satisfied, then in the absence
of some special
circumstances, the court should ordinarily grant the order. It
is for the respondent to establish the special
or unusual
circumstances that warrant the exercise of the court’s
discretion in his or her favour.”
[18]
Based on the uncontroverted evidence of the respondent, he knew two
years after the divorce
[8]
that
he owed money for maintenance as he could not afford to pay as he was
unemployed. It is needless to mention that at
that stage he had
realisable assets he could have disposed to meet this obligation.
He continued not to pay the maintenance
for five years after the
divorce. Well knowing that he had a debt, he decided to sell
all his assets and did not settle the
maintenance debt.
Certainly the disposition of all the assets prejudiced his children
to whom he had an obligation to maintain
from his assets. The
action of disposing all his assets fell afoul of contravening section
8(c) of the Act. I shall
not be drawn, for purposes of this
application, to the issue involving the Trust. The
mismanagement of the Trust funds is
not relevant in these
proceedings. There are other remedies available to deal with
the issue of the Trust. I am satisfied
that the applicant has
on a balance of probabilities established the requirements for a
final order of sequestration.
[19]
As a result the following order is made.
The
rule nisi
is confirmed with costs.
__________________
M MAKAULA
Judge
of the High Court
Appearances
:
Counsel
for the Applicant:
Adv DS Bands
Instructed
by:
Van Der Merwe & Associates
c/o
Du Toit Attorneys
For
the Respondent: Mr
Laubscher
Instructed
by: Stuart
Laubscher Inc
Date
heard: 3
February 202
Date
judgment delivered: 19
May 2020
[1]
24
of 1936.
[2]
See
also Mars: The Law of Insolvency in South Africa 9
th
Edition page 134 and The law of South Africa: Joubert First Issue,
Volume 11 at page 122 paragraph 140.
[3]
Enter
Centre Enterprise v Brogneri
1972(1) SA 117 (C) at 121.
[4]
Behrman
v Sideris and Another
[1950]
2 All SA 226
(T) at 230.
[5]
De
Villiers NO v Maursen Properties (Pty) Ltd
1983(4)
SA 670 at 676 E and the authority cited therein.
[6]
De
Waardt v Andrew and Thienhaus
1907
TS 727.
[7]
2011
(4) SA 597
(KZN) at p 607 D –E.
[8]
Which
was granted on 18 May 2010.